Australian Property Market Update: The Monthly Value Change

The monthly growth rate of Australian property values is slowing, it’s a downward trend likely to continue until 2022.

In the November 2021 Property Pulse report by CoreLogic, Eliza Owen, the Head of Research attributed the slowing growth to numerous factors like rising affordability constraints, falling mortgage rates, and a higher number of new property listings that took the pressure off the market. 

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The monthly increase in housing values has slowed to 1.5 per cent (approximately $10,000 per month) as compared to the peak in March 2021 at 2.8 per cent (approximately $16,000). March ‘21 saw the highest monthly growth rate in the Australian dwelling values.

The elite and the ‘high’ end Australian property market (home values around $1,000,000 or more) saw the most prominent reduction in the monthly dwelling values. The market which was once peaking at 3.5% in March ‘21 has slowed to 1.5% this October ‘21. 

For the past 12 months, the highest value segment has seen the greatest level of gain i.e. 25.4 per cent compared to 18.4 per cent across the middle market and 16.7 per cent of the lower end. 

The rapid decline in housing prices in the ‘high’ end segment shows the volatility of the high-end housing market. It suggests that the elite Australian dwelling values can expect a higher drop in value in the foreseeable future. 

Noticeably, the growth rates are slowing across the nation but the October home value index results reveal differences in the momentum across the capital city markets. Five out of 8 major cities are seeing a major downturn in their monthly growth. 

Let’s take a look at the changes in the values of capital cities:

Sydney

Sydney saw one of the fastest slowdowns in the monthly growth rates from a peak of 3.7 per cent in March ‘21 to 1.5 per cent through October. The reasons for this strong downturn is home affordability constraints and additional listings on the property market in recent weeks. 

Melbourne

The third fastest slowdown in the monthly growth rates of capital cities was noted in Melbourne. The dwelling values in Melbourne slowed from a peak of 2.4 per cent in March 2021 to 1.0 per cent through October. 

This year Melbourne saw headwinds because of extended lockdowns and the closure of international borders. Nevertheless, Melbourne saw a downturn because of a record-breaking increase in the number of listings (17 per cent above the 5-year average).

Interestingly, despite the slowdown, it’s noticeable that the monthly growth rate of 1.0 per cent is significantly higher than this decade’s average monthly movement of 0.4 per cent. 

Brisbane

Interestingly, in Brisbane, the monthly growth rates are on a rise. The dwelling values are re-accelerating as the property values increased by 2.5% through October. This is the highest monthly growth rate value recorded since November 2003.

Due to the COVID-19 pandemic, the Brisbane housing market has seen some extraordinary tailwinds. As the housing prices in Sydney and Melbourne rose over the year, there were cases of rising interstate migration to Brisbane. 

Normalized remote work culture, low exposure risk to the virus, people choosing to buy their dream homes with blogger space in their budget were the reasons why Brisbane became a hot spot. 

Due to the slow growth rate across all the previous years, the typical dwelling values in Brisbane seemed affordable to people compared to Melbourne and Sydney.

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Adelaide

Similar to Brisbane, the Adelaide property market also saw its largest monthly increase since 2003 with capital gains of 2.0 per cent through October. The monthly growth rate for units increased by 1.0 per cent, the impetus was led by a 2.2 per cent increase in the dwelling values across Adelaide.

The reasons for this increase in demand in the Adelaide housing market are similar to that of Brisbane: an increased interstate migration trend, relative affordability compared to other capital cities, and low property listings.

Perth

The dwelling values in Perth stooped to -0.1 per cent over October. The dwelling values fell flat from a peak of 2.7% in February 2021 marking Perth with the fastest downturn in growth rates. 

The severe slowdown in momentum was caused by a combination of factors like extended state border closures, affordability constraints for first home buyers and a recent upswing in new listings in the market.

Hobart

Despite a decline in the monthly dwelling values from 3.3 per cent in March ‘21 to 2.0 per cent in October, the growth rate in Hobart is comparatively higher (about $13,274 increase in the median housing value). 

Hobart still sees strong demand for housing from interstate buyers as opposed to extremely low and tight levels of stock. There were as low as only 660 properties listed on sale in Hobart in the last 4 weeks.

Darwin

Darwin’s property market is relatively small which causes the monthly growth rates to be volatile. Nonetheless, Darwin is not seeing any trend of increase in the dwelling market. 

In the third quarter of the year, the monthly growth rate declined by 0.1 per cent from a growth rate of 2.7% in April 2021. Although the decline is slower and the values inch higher, the dwelling values in Darwin are still -15 per cent below the record high value reached in May 2014.

Canberra

Similar to Hobart, the Canberra housing market has also seen a greater level of housing demand against a low level of property stock. 

It’s a respite to buyers that the monthly increase has still shown signs of slowing from its peak of 2.6 per cent in July 2021. Currently, the monthly growth rate in dwelling values across Canberra has slowed to 1.9 per cent. 

Conclusion

Although the property value growth rate continues to drop each month across the nation, the reduced rates are still comparatively on the higher side. When you measure the Australian property values over the last decade, the average monthly growth rate has been 0.4% which is significantly lower than the present slowing rate. 

Real estate experts at Agent Select also attribute factors like tighter lending conditions, an increase in new listings, mortgage rates getting bottom out, and the rise in affordability issues as reasons for the downward trend in the monthly growth rate.

There was a strong inflation forecast in the September quarter so people anticipated a tighter monetary environment as early as 2022 but the recent statement from the Reserve bank suggested a hike earlier than expected. We discussed previously the implications of APRA tightened the restrictions on home loan requirements

Higher cash rate and mortgage rates are likely to put downward pressure on the values which will be crucial to watch.

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